AirAsia May Add Only One More Hub to Focus on 3 Key Markets

Tony Fernandes, chief executive officer of AirAsia Bhd.

AirAsia Bhd. (AIRA), the region’s biggest discount carrier, said it may add only one more major hub for expansion as it focuses on boosting profits from Malaysia, Thailand and Indonesia in the next three years.

AirAsia aims to increase annual profit from its three main markets to one billion ringgit ($327 million) each, Group Chief Executive Officer Tony Fernandes said in an interview in Kuala Lumpur today. Taiwan, South Korea, Vietnam and India are among the potential markets for a new base, he said.

“We have three gold mines in Malaysia, Thailand and Indonesia and I really want to capitalize on those three first,” Fernandes said. “I’m beginning to feel that I’d rather focus on these. On top of that I still have energy for another biggie, and maybe a few small ones in Laos, Cambodia and Myanmar.”

Negotiations with Airbus SAS for ordering 100 more A320s may be completed by the end of next month, Fernandes said, as the carrier expands operations to fend off rising competition. Malindo Airways, a venture backed by Indonesia’s PT Lion Mentari Airlines, is set to start low-cost flights in Malaysia next year as the region’s economic growth spurs travel demand.

‘Strong Branding’

“The accelerated roll out of aircraft in Malaysia to dominate routes ahead of the start up of Malindo Airways in March 2013 is a good defensive measure,” Annuar Aziz, an analyst at Credit Suisse Group AG, wrote in a report yesterday. “Coupled with its strong branding, we expect AirAsia to withstand the challenge.”

Photographer: Goh Seng Chong/Bloomberg

Tony Fernandes, chief executive officer of AirAsia Bhd. Close

Tony Fernandes, chief executive officer of AirAsia Bhd.

Close
Open
Photographer: Goh Seng Chong/Bloomberg

Tony Fernandes, chief executive officer of AirAsia Bhd.

AirAsia, which also operates ventures in the Philippines and Japan, was unchanged at 2.85 ringgit at close of Kuala Lumpur trading, after yesterday posting its third-straight increase in quarterly profit. The stock has fallen 24 percent this year, compared with a 5.7 percent advance in the benchmark FTSE Bursa Malaysia KLCI Index.

Net income increased 3.6 percent to 157.8 million ringgit in the three months ended September from 152.3 million ringgit a year earlier, the Sepang, Malaysia-based carrier said in a statement yesterday after trading hours. Revenue rose 15 percent to 1.24 billion ringgit.

Thai AirAsia posted a profit of 199 million baht ($6.5 million) in the quarter while the Indonesian venture had net income of 74.5 billion rupiah ($7.7 million), the company said in the statement.

AirAsia’s main Malaysian unit carried 9 percent more passengers and expanded capacity 10 percent. The group, which currently has a fleet of 112 A320s, plans to take delivery of 266 more planes by 2026. It will add 11 more A320s this quarter, according to the statement.

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editor responsible for this story: Neil Denslow in Hong Kong at ndenslow@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.